The OFCCP Extends Its Reach To Healthcare Providers

The Office of Federal Contracts Compliance Programs (OFCCP), the branch of the U.S. Department of Labor charged with overseeing affirmative action obligations, has recently targeted the healthcare industry for increased enforcement. Healthcare providers have comfortably operated for years under the belief that receipt of funding from the government does not subject them to the affirmative action obligations imposed on federal contractors, which includes creating an affirmative action plan and maintaining various records.

The OFCCP recently argued that contracts to provide medical services for a government agency do create affirmative action obligations. Consequently, a flurry of administrative actions has ensued as healthcare providers challenged the OFCCP's new position. An OFCCP Directive issued on December 16, 2010, summarizes recent legal interpretations and affirms the agency's position that the receipt of most Medicare or federal grants alone does not create federal contractor status. However, contracts to provide health care services for TRICARE beneficiaries or other federal agencies are now deemed to create affirmative action obligations.

The OFCCP Extends Its Reach To Healthcare Providers By Cheryl Behymer and Richele Taylor (Healthcare Update, No. 1, February 2011) The Office of Federal Contracts Compliance Programs (OFCCP), the branch of the U.S. Department of Labor charged with overseeing affirmative action obligations, has recently targeted the healthcare industry for increased enforcement. Healthcare providers have comfortably operated for years under the belief that receipt of funding from the government does not subject them to the affirmative action obligations imposed on federal contractors, which includes creating an affirmative action plan and maintaining various records. The OFCCP recently argued that contracts to provide medical services for a government agency do create affirmative action obligations. Consequently, a flurry of administrative actions has ensued as healthcare providers challenged the OFCCP's new position. An OFCCP Directive issued on December 16, 2010, summarizes recent legal interpretations and affirms the agency's position that the receipt of most Medicare or federal grants alone does not create federal contractor status. However, contracts to provide health care services for TRICARE beneficiaries or other federal agencies are now deemed to create affirmative action obligations. This position was argued in a recent case, in which an administrative law judge upheld the OFCCP's enforcement strategy, demarcating a difference between funding reimbursement and contractor responsibilities. Healthcare providers now face the challenge of determining on which side of this line their contracts fall. OFCCP v. Florida Hospital of Orlando. Background In 2003, the issue of whether healthcare providers were subject to the OFCCP's jurisdiction due to contracts with Medicare was at issue in OFCCP v. Bridgeport Hospital. There the Administrative Review Board (ARB) found that reimbursement contracts were not enough to subject healthcare providers to the OFCCP's requirements. Healthcare providers assumed that this decision meant that similar contracts did not subject them to affirmative action obligations. The OFCCP challenged this assumption in 2009, in OFCCP v. UPMC Braddock, and carved out an important exception. The ARB reviewed whether a hospital's contract to provide medical services for a non-governmental agency created a federal subcontractor relationship due to the third party contract with the federal government. UPMC, an HMO, entered into a contract with the Office of Personnel Management to provide medical services for federal employees. UPMC then entered into agreements with individual physicians, medical groups, and hospitals to provide the contracted-for services. The initial contract between UPMC and OPM expressly excluded the hospitals from subcontractor status. But the ARB held that providing services, as opposed to providing only medical insurance, created a subcontractor status with the federal government and placed the hospital squarely under the affirmative action guidelines. The case is currently on appeal to the federal district court in Washington. The decision caused concern in the healthcare industry as most healthcare providers had been operating under the assumption that such contracts did not subject them to affirmative action obligations. Reimbursement v. Providing Services The OFCCP then initiated a compliance review of Florida Hospital of Orlando (FHO), a non-profit hospital. FHO responded that the OFCCP lacked jurisdiction over it and that it was not subject to the affirmative action requirements. FHO based its argument on the OFCCP v. Bridgeport Hospital case, arguing that contracts for reimbursement are not considered federal contracts subject to affirmative action program responsibilities. The OFCCP disagreed, arguing that FHO provides medical services pursuant to a federal subcontract with Humana through its contract with TRICARE and did not simply receive reimbursement. The OFCCP had argued this similar position successfully in the OFCCP v. UPMC Braddock case. Drawing Distinctions TRICARE is a Department of Defense program that provides worldwide health insurance for military members and their families. TRICARE contracts with other companies to administer its health program. In August 2003, Humana Military Healthcare Services (HMHS) entered into a contract with the Department of Defense to provide health-benefits support and services to eligible military and their family members in a portion of the southern United States. Other service providers hold contracts to provide services elsewhere, such as Health Net for the northern area. These service providers agree to provide services for TRICARE, which include providing a network of health care providers and medical specialists. HMHS and other service providers then subcontract with the healthcare providers, such as hospitals, to provide these services. Essentially, healthcare providers that hold these subcontracts are providing services for the federal government, helping companies such as HMHS fulfill their government contracts with TRICARE. In contrast, contracts with Medicare are considered reimbursement contracts whereby hospitals are simply reimbursed for services. What Does This Mean To You? With the new delineation between reimbursement contracts and subcontracts, healthcare providers must review current contracts in place. This is no easy feat as not all contracts include a notification provision that the subcontractor is subject to affirmative action requirements, yet the healthcare provider may still be responsible for compliance. The December 16, 2010 Directive sets forth parameters to consider in evaluating contracts. If a contractor relationship exists, a healthcare entity must immediately begin gathering appropriate data and taking other steps to ensure compliance with affirmative action requirements. Healthcare providers subject to the federal contractor requirements must comply with affirmative action obligations under several federal laws, and are required to take such steps within 120 days after entering into the contract. These obligations include implementing an Affirmative Action Program (AAP) with written plans (including statistical analyses) for minorities and women, and creating AAPs for veterans and disabled individuals. Employers also must list all open positions with the relevant state unemployment agencies and demonstrate outreach efforts for minorities, women, veterans and disabled applicants. In addition, companies are required to evaluate personnel actions and compensation on a yearly basis to see if a specific gender or racial group has been impacted negatively. The failure to comply may subject a company to sanctions that include back pay for employees or applicants, or the loss of contracts. To find out if you're in compliance, and how to get that way if you're not, contact your Fisher and Phillips attorney. For more information contact the authors at cbehymer@laborlawyers.com, rtaylor@laborlawyers.com or 803-255-0000.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

"My best business intelligence, in one easy email…"

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Privacy Policy (Updated: October 8, 2015):

hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.